PIL claims FDI violation by Flipkart and Amazon: HC seeks Centre's reply

The Delhi High Court today sought the stand of the Centre and Amazon and Flipkart on a PIL alleging that the e-commerce giants were violating foreign direct investment (FDI) norms.

A bench of Acting Chief Justice Gita Mittal and Justice C Hari Shankar issued notice to the Centre, Amazon and Flipkart seeking their response by November 11 to the plea which has sought a probe into the alleged FDI violations.

The petition by an NGO, Telecom Watchdog, has also asked for initiation of legal proceedings against the two e-commerce giants under the Foreign Exchange Management Act (FEMA) for alleged violation and circumvention of FDI.

The plea, filed through advocate Pranav Sachdeva, has claimed that Amazon and Flipkart have created multiple entities to circumvent the FDI norms and route the hot-selling stock at cheaper rates.

The petition has contended that according to Press Note 3 of 2016, which regulates FDI in e-commerce, entities like Amazon and Flipkart are not to exercise ownership over the stock, nor directly or indirectly influence price of goods and services sold on their marketplace.

It has claimed that by creating name lending companies, Amazon and Flipkart buy branded goods in bulk at discounts from manufacturers and render small sellers uncompetitive by a wide margin, thus influencing the prices in violation of the FDI norms.

"As a consequence of this FDI norms violation, smaller sellers are unable to participate in the fast growing e-commerce sector," the plea has contended and added that due to subsidized prices on such platforms, small sellers are unable to sell in the brick-n-mortar world too.

"The cumulative impact of this is that the marketplaces have usurped the space meant for small retailers by turning into proxy sellers via their name lending companies," the petition has alleged.

Apart from that the plea has also claimed that the two e-commerce giants have created several other group companies in the chain to divide discounts and losses.

"Exchange offers, EMI costs and bank offers are funded completely or substantially by Amazon and Flipkart and constitute a clear influence on price in violation of FDI norms," it said.